Indirect Procurement Takes Center
Stage: A Call to Action for
Healthcare Supply Chains
At the recent AHRMM annual meeting, indirect procurement took the spotlight, headlining the conference with a thought-provoking and impactful panel discussion. Moderated by the American Hospital Association – AHRMM Board Chair Amanda Chawla, Senior Vice President and Chief Supply Chain Officer at Stanford Medicine, the session challenged healthcare supply chain executives to elevate their approach to managing indirect procurement. The panelists delivered a clear message: healthcare must transform and fundamentally redesign its management of non-labor spending with an emphasis on indirect spending to align with other industries.
A Harsh Reality Check
Dr. Randy Bradley, Dean of the Jack C. Massey College of Business at Belmont University, delivered a striking critique, stating that the lack of attention to indirect spending in healthcare would be “grounds for dismissal” in any other industry. This bold statement underscored the urgency for healthcare organizations to prioritize indirect procurement as a strategic, centralized function bringing value to the business.
Defining Indirect Procurement
Indirect procurement refers to the sourcing and management of goods and services that are not directly tied to the production of a company’s core products or services. In healthcare, this is often referred to as “non-clinical” or “purchased services,” encompassing areas such as IT, facilities management, consulting, construction, and administrative services. In retail, it is commonly known as “goods not for resale (GNFR),” which includes items like store fixtures, marketing materials, and utilities. While indirect procurement may not directly impact the end customer, its effective management is critical for operational efficiency and cost control.
Earning a Seat at the Table
Jo Seed, Chief Operating Officer at LogicSource Inc., built on Dr. Bradley’s critique by reframing the common narrative. Instead of simply demanding that procurement “have a seat at the table” when business owners engage suppliers for indirect products and services, Jo argued that procurement must earn its seat. To do so, procurement teams need to bring:
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Benchmarks: Data-driven insights to inform decisions. - •
Market Experience: A deep understanding of supplier landscapes. - •
Category Expertise: Specialized knowledge to add value. - •
Business Perspective: An appreciation for the needs and goals of business users.
Jo emphasized that merely negotiating better deals is no longer enough. Procurement must build trust with business owners, who are often protective of their domains, by demonstrating value beyond cost savings.
Healthcare’s Lag in Indirect Procurement
A recurring theme of the discussion was how far behind healthcare is compared to industries like retail and consumer packaged goods (CPG) in managing indirect spending. Panelists observed that, although many healthcare products and services are widely used in other sectors, those industries are already a decade ahead. Jo Seed highlighted the “wedding premium” often paid in healthcare, an inflated cost with little business justification.
Karen Kresnik, Vice President of Spend Management Delivery at Vizient, Inc., acknowledged the importance of clinical input in procurement decisions, especially when products or services impact patient care.
The Ideal Procurement Model
The panelists outlined a vision for an ideal procurement model, where procurement, FP&A (Financial Planning & Analysis), and business owners are fully aligned. This alignment ensures a seamless sourcing, contracting, and procurement process, leaving no room for miscommunication or inefficiencies.
Jo Seed advocated for centralizing indirect procurement across the enterprise and establishing robust governance models. These models should ensure that procurement decisions prioritize the best interests of the organization. Additionally, transparent escalation processes should be in place to address decisions that fail to meet this standard.
“With the pressures of tariffs and the challenges posed by the One Big Beautiful Bill, healthcare organizations must double down their efforts to drive value, improve efficiency, and lower costs. To succeed, we must seek opportunities in areas left relatively untouched by earlier efforts and learn to operate differently by observing leading companies from outside of healthcare, who have a ten-year head start on us. By placing a focus on indirect procurement and governance, we can position healthcare organizations to better navigate today’s dynamic and demanding environment.”
Supply Chain Officer, Stanford Medicine
The panel concluded with a clear call to action for healthcare organizations: adopt best practices from industries that are leading the way in indirect procurement. As the way in which you ensure clinical spend, you have the clinician at the table – the same can be said for indirect spend. Chief among these is getting benchmarking right. For indirect purchases, which often do not lend themselves to straightforward unit pricing, benchmarking can be particularly challenging and therefore is where we can follow the trail blazed by those already well down this journey.
By centralizing procurement, leveraging data and expertise, and fostering alignment across stakeholders, healthcare can close the gap and unlock significant value in indirect spending.
Indirect procurement is no longer a back-office function; it is a strategic imperative. As the panelists made clear, the time for healthcare to step up its game is now.
Looking for a partner to help with your non-clinical sourcing and procurement needs? Get in touch with us, and we’ll walk you through the process.
About The Author
Mark Van Sumeren
Board Observer and Chair, Healthcare and Life Sciences
Mark Van Sumeren is the strategic advisor of the healthcare practice at LogicSource. He is a supply chain expert with 35 years of experience in business strategy and healthcare consulting. Mark has spent his career supporting health systems across the industry including large, academic medical centers, integrated delivery networks and for-profit health companies.